AICPA Insightstag:typepad.com,2003:weblog-866829862384821872018-08-06T12:24:54-04:00TypePadConfessions of a young tax practitionertag:typepad.com,2003:post-6a0133f5884316970b022ad3a687d3200b2018-08-06T12:24:54-04:002018-08-06T12:24:54-04:00Olena Romanchuk, CPA, knows what it’s like to fall in love with tax at an early age. She was only fifteen the first time she pored over a stack of ledgers. After studying accounting in her home country of Ukraine, Olena came to the United States as an exchange student....AICPA Communications

Olena Romanchuk, CPA, knows what it’s like to fall in love with tax at an early age. She was only fifteen the first time she pored over a stack of ledgers. After studying accounting in her home country of Ukraine, Olena came to the United States as an exchange student. She later attended Western Carolina University and fell for the tax profession all over again.

While Olena was developing her tax skills, Glenda Bowman was trying to figure out exactly what she wanted to do in college. As the first person to pursue a bachelor’s degree in her immediate family, just getting to college was a significant accomplishment. She said she was a typical college student who went straight into general business before she felt something click in her first accounting class that led her to embrace the profession and become a CPA.

College life was a different experience for Thomas Presley. He said he knew precisely what he wanted to do, and that wasn’t accounting. The son of an IRS agent, Thomas wanted to be an engineer. But a physics class made him think twice, and a childhood interest in the tax profession took hold as he followed through to earn his CPA.

Despite having different backgrounds and following different paths, Romanchuk, Bowman and Presley each have one thing in common. They are part of the new wave of tax practitioners poised to drive the profession into the future.

These three CPAs joined staff of the Association of International Certified Professional Accountants in June for an honest conversation about the tax profession. They tackled topics ranging from tax reform to technological changes to what the profession will look like in the future. Here’s what they had to say.

Technological advancements and the tax profession

A sole practitioner in Wake Forest, N.C., Presley said young tax professionals are not afraid to try out new technologies or embrace the changes that come with the job. For him, it’s about reevaluating his clients’ needs to take them to their next financial level. This means rolling with the punches as they come his way.

“It boils down to the fact that we cannot be stagnant,” he said. “We need to move forward with the industry and new tax laws with new computer programs, new software, and new technologies across the board.”

It’s CPAs like Romanchuk who are helping to drive these technological changes. As a tax analyst at Drake Software, Romanchuk’s job is to interpret tax law and help make software that enables tax practitioners to do their jobs better. She equates this tax technology to life — it’s always changing. That’s what she most loves about tax.

“It’s something that I enjoy doing. I like to navigate through a small portion of tax law, then step back and look at it as a whole to solve the puzzle,” she said. “We just need to adapt to it, to use technology. It helps us do meaningful work.”

“In almost every way, the tax profession of tomorrow will look very different than it looks today,” Bowman said. “Every day, I learn of a new tax service, a new tax technology, and a new tax challenge facing our clients. As long as our clients’ business environment and demands continue to change, the tax profession will continue to change almost on a daily basis.”

Legislative changes and the role of the CPA in clients’ lives

Presley said that he loves tax reform because it gives him a new problem to solve. He admits that it can be frustrating to wait for the IRS to iron out all the details, but that it simply adds to the overall excitement and feeling that he is on the cusp of a very exciting time for the profession.

He wasn’t alone in that sentiment.

“I think there are challenges and advantages,” Romanchuk said. “The advantage is that young CPAs who don’t have a lot of experience are now on the same playing field as seasoned CPAs. It is an opportunity in learning and exploring.”

Bowman, who works as a tax manager at Ernst & Young (EY), finds that the changing nature of tax legislation feeds her passion for the profession. And she said it’s her job to keep up, particularly when clients are looking for answers.

“The tax profession is always changing, and my clients see me as their advocate and not just a service provider,” she said.

“Having reform, whether it be small or large, gives me the opportunity to provide a value-added service to any and all of my clients,” Presley said. “Tax reform gives me a new problem to solve. So, I say ‘bring it on.’”

This generation’s take on what’s next for tax

Bowman lives and breathes tax. Outside of travel, Bowman admits she doesn’t have a lot of hobbies, but that’s because her career directly touches on what’s at her core — her community.

“Tax is more than just a daily job. We are here to contribute to our communities, contribute to the economy, and contribute to the businesses of our clients,” she said. “If you enjoy the highly technical nature of tax, are interested in the way tax and business strategies impact our local and global economies and want to be part of a truly innovative environment, you should join the tax profession.”

Romanchuk thinks the nature of the tax profession is what makes it so exciting. She describes tax as a series of flavors — a wide set of options for curious minds.

“I have not met a tax professional who would say that their job is boring or not challenging enough,” she said. “If you like challenges, analytical work and problem solving, then the tax profession is for you.”

“This new generation of CPAs in the tax profession, I believe, is going to reform the CPA firm,” Presley said. “The accounting profession must continue moving forward. Because if you are not moving forward, you are getting left behind. And that’s just not the way this generation works.”

Endnote

Romanchuk and Presley joined Tax Policy & Advocacy Senior Manager Amy Wang, CPA, and Tax Practice & Ethics Senior Manager Susan Allen, CPA, CGMA, for a live panel discussion tackling these issues. A rebroadcast of the panel can be found here.

The Young CPA Network provides a place where new and emerging professionals can forge valuable relationships and find the information and resources they need to help enrich and support their careers. And to find out how you can take on a career in tax, visit aicpa.org/taxcareers to learn about exciting new ways to take your passion to the next level.

Calling all tax CPAs: help quality reviews take center stagetag:typepad.com,2003:post-6a0133f5884316970b022ad3845ba4200d2018-07-27T09:36:16-04:002018-07-27T09:37:34-04:00Data breaches happen daily. We see it in the news, and we hear it from our clients. Clients trust us with their private information including Social Security numbers, paystubs, birthdays and other data valuable to identity thieves. We need to maintain security and provide the best service for our clients....Guest Blogger

Data breaches happen daily. We see it in the news, and we hear it from our clients. Clients trust us with their private information including Social Security numbers, paystubs, birthdays and other data valuable to identity thieves.

We need to maintain security and provide the best service for our clients. To do this, we must observe two things: integrity and adherence to the quality of services we deliver. And both require obedience to specific standards of behavior.

In the case of quality, there are many ways to prove we’re adhering to standards. Reviews of our work are one. But doing so can raise significant concerns for practitioners, particularly when it comes to logistics.

Practical applications of tax practice reviews

In a practice environment, reviews take place as part of our daily routine. When a client engages a firm to provide professional services, the firm gathers and evaluates data and information necessary to complete the job to produce a deliverable. During this process, the final product — whether it’s a set of financial statements, a tax return or an advisory memo — undergoes a review to make sure the finished product is complete and accurate.

Other times, an outside organization like the American Society for Quality (ASQ) or the International Organization for Standardization (ISO) grants a specific accreditation. These types of endorsements demonstrate the firm is following prescribed standards. This assures the customer that what an organization should be doing — or says it’s doing — is being done. A mandated peer review exercise is usually done in the context of an attest practice. However, this type of third-party quality review can be undertaken by other parts of a firm’s practice on a voluntary basis. Having an outside party review an organization’s operations, policies and procedures is another way to demonstrate quality in performance.

The recently updated AICPA Tax Practice Quality Control Guide states that one of the key elements of maintaining a quality control system is the monitoring of operations. This can be straightforward for larger firms that often have internal groups review the actions of individual departments. This makes sure all employees adhere to the firm’s standards of quality, regardless of the physical location of the office or the client’s business or size.

It’s much more challenging for a smaller firm or a sole practitioner. Issues could arise such as a lack of sufficient internal resources or enough qualified personnel on staff to perform such an examination. And if someone outside the firm is engaged in the review, it’s essential they adhere to the rules surrounding access to confidential client information.

Guiding the way for easier quality reviews

Many firms wonder if a client’s permission is required for their records to be included in such a quality review. Recently, the AICPA’s Professional Ethics Executive Committee (PEEC) issued an exposure draft titled Disclosing Client Information in Connection With a Quality Review. This is intended to be a new interpretation of the Confidential Client Information Rule (AICPA, Professional Standards, ET sec. 1.700.001) of the AICPA Code of Professional Conduct, which would expressly allow a CPA to undertake such an assessment without violating the Code of Professional Conduct.

An existing exception to this rule restricting the exchange of confidential client information is in place for firms undergoing a mandatory peer review. Such confidential information can also be shared in conjunction with the evaluation of a professional practice subject to an acquisition or if such a review was required by a state board of accountancy or state society.

If adopted, this interpretation would allow for voluntary tax practice reviews to take place as long as:

the member complies with Treasury Regulation 301.7216-2(p) related to disclosures of tax return information that occur during such a review, and

the member who performs such a review, doesn’t use the information obtained during the review to their advantage nor do they disclose any confidential client information that comes to their attention during the review engagement.

By issuing this interpretation, PEEC clarifies these reviews can take place without exposing a member to any violation of the AICPA’s Code of Professional Conduct.

Comments should be submitted via email to: Ethics-ExposureDraft@aicpa-cima.com by August 20, 2018. After evaluating the comments, PEEC may decide to publish the proposed interpretation in a final release. Once published, the interpretation will become effective on the last day of the month in which the release is published in the Journal of Accountancy, unless otherwise stated in the release.

Could IRS reform mean smoother waters for tax practitioners?tag:typepad.com,2003:post-6a0133f5884316970b022ad35d1ccc200c2018-07-22T21:18:06-04:002018-07-26T16:38:39-04:00“. . . once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” - Report of the National Commission on Restructuring the IRS, 1997 Last year, I wrote a blog about tax reform and quoted country singer Michael Ray...Edward Karl, CPA, CGMA

“. . . once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” - Report of the National Commission on Restructuring the IRS, 1997

Last year, I wrote a blog about tax reform and quoted country singer Michael Ray that “[t]oday only happens once in a lifetime.” I talked about how I was around for the 1986 tax reform process and passage of the legislation, so happening once in a lifetime might be twice for me, as tax reform was then developing. I’m also hoping that twice in a lifetime refers to IRS reform.

What’s amazing is that, on average, only about five percent of bills introduced in Congress are ever signed into law. And many of those were originally introduced in a prior Congress and failed to move. The 1998 legislation emerged from a bi-partisan Commission that issued its report in only a year. Surprisingly, it was enacted a year later.

The introduction to that report stated: “[I]t has been over forty years since Congress and the President have considered significant reforms to the . . . IRS. With this report, once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” That time is here again.

In April, the AICPA undertook its fourth “Survey on Tax Practitioners’ Experience with the IRS” in an attempt to guage our members’ experiences. There has been some improvement since 2015 but problems still abound:

Although overall practitioner wait times to talk to IRS assistors have decreased, the satisfaction with the quality of the service has also decreased.

Courtesy disconnects and long wait times are still happening, mainly during non-busy season.

The biggest impact to practitioners remains the inefficiency with which the IRS responds to written communications. There has been no significant improvement in the IRS’s ability to provide a “substantive response” to correspondence in a timely manner. This is happening despite the IRS saying that additional funding from Congress was for more telephone assistors who would focus on correspondence when they weren’t handling calls.

Other reasons for practitioner dissatisfaction with the IRS are the long wait times and the inability to talk with someone knowledgeable who can actually help resolve a taxpayer issue.

Over half of practitioners do not think the IRS is on the right path to becoming a modern-functioning, evolutionary and respected federal agency.

These member reactions, which were evident in earlier survey results, were part of the reason the AICPA led an effort, in collaboration with other professional organizations and former IRS executives, to develop a framework we called “Ensuring a Modern-Functioning IRS for the 21st Century.” A central part of that effort is our push for a dedicated “practitioner services” division that would centralize and modernize the IRS’s approach to tax practitioners. Simply put, this division would allow the IRS to leverage its limited resources to serve taxpayers by doing a better job with practitioners.

So where do things stand? A package of nine bills have been introduced, and are intended to:

Redesign the IRS to emphasize customer service,

Provide new taxpayer appeal rights,

Improve responsiveness to victims of identity theft,

Modernize IRS technology.

These bills were appended to H.R. 5444, the Taxpayer First Act, and passed unanimously in the House on April 18. Senate Finance Committee Chair Orrin G. Hatch (R-UT), and Sen. Ron Wyden (D-OR)., the committee’s ranking member, introduced similar legislation, S. 3246, the Taxpayer First Act of 2018 on July 19. In addition, Senate Finance Committee members Rob Portman (R-OH) and Benjamin Cardin (D-MD) are expected to introduce “complementary” legislation to S. 3246 the week of July 23. However, with the mid-term elections looming, it’s unlikely we’ll see movement. Maybe during the “lame-duck” session of Congress where, starting November 13, the House will be in session for 16 days and the Senate for 19 days…

As Hal Borlan, an American author, journalist and naturalist once said, “[k]nowing trees, I understand the meaning of patience. Knowing grass, I can appreciate persistence.” Persistence is a good virtue in the legislative process. And persistence will be necessary to once again pass IRS reform even if we have to look all the way back to July 22, 1998.

Is hiring a CPA worth it in 2018?tag:typepad.com,2003:post-6a0133f5884316970b022ad39e9d9a200b2018-07-05T09:35:56-04:002018-07-05T09:36:17-04:00When people hear I’m a CPA who specializes in tax, the question invariably comes up — what do I think about the new Tax Cuts and Jobs Act (also known as “tax reform”)? I’m not one to talk about politics, so to be neutral, I say “it’s certainly an exciting...Guest Blogger

When people hear I’m a CPA who specializes in tax, the question invariably comes up — what do I think about the new Tax Cuts and Jobs Act (also known as “tax reform”)? I’m not one to talk about politics, so to be neutral, I say “it’s certainly an exciting time to be a CPA in tax.” No question, many of the provisions of tax reform bring added complexity to areas of the law that were not simple to begin with.

Some individuals will continue to feel comfortable using tax preparation software, but there are circumstances where “you don’t know what you don’t know,” requiring you to call in the help of a CPA. A great CPA can provide much more value than just the peace of mind that comes from knowing that your forms are correct. They can provide planning and tax advisory services, consultation, business and international accounting, forensic accounting, business valuation and more.

Read on to learn four reasons why it’s worth hiring a CPA.

To better understand your big financial picture

There are a variety of questions to determine if a CPA is right for helping you assess your overall financial well-being:

Do I have a clear grasp of my financial situation and how the new law will shape it?

When will I reach my savings or investment goals? Should I set new ones now?

How does tax reform affect decisions such as selling my house, retiring, taking a sabbatical, supporting a favorite charity, or sending my kid (or me) to college or grad school?

Figuring this out on your own is tough. Having a trusted adviser in your corner who knows all about your circumstances and looks at the big picture can make a critical difference. A CPA can help you start thinking about strategic timing and next steps, so you don’t miss out on important opportunities.

To help you save for the big stuff

If saving up for education expenses, a baby or retirement seems daunting, you’re not alone. Some frequently asked questions in this area are:

My spouse wants to go to grad school. Can we swing this?

What is the best way to contribute to my children’s’/nieces’/nephews’/grandchildren’s college costs?

Am I saving enough to retire early? Is that even possible?

A CPA will help you strategize, whether you’re saving for school or saving for retirement. For example, under the new law, 529 funds can be used to pay private school tuition. A CPA can recommend the best way to fund the 529 and how and when to use it. A CPA can also assist in evaluating investment options that would be the most tax efficient to maximize your return in retirement.

To make the most of your retirement

Your ideal retirement might be sipping a cocktail on the beach, or it might be trekking across America in an RV. Either way, there are specific questions to ask yourself in order to make the most of this next life stage, such as:

When should I start receiving Social Security benefits? What are the tax implications?

What is the best way to draw down retirement funds to minimize taxes and prevent financial problems?

Is my estate planning in order?

Knowing how to handle Social Security benefits is critical. In 2017, 50% of married couples and 71% of single people aged 65 and older relied on Social Security for at least half of their income. A CPA can fill you in on what you need to know and work with you to develop an action plan.

Similarly, he or she can work with you and other professionals to create an estate plan that honors your wishes and minimizes taxes for your beneficiaries. Tax reform greatly reduced the number of taxpayers subject to federal estate tax, but only through 2025. If your state taxes estates, you will need to take that into consideration. Thinking about the distribution of your assets can be difficult; however, you can enjoy the peace of mind that comes with knowing everything is in order.

To prepare you for whatever life throws at you

We all know the reality of the Forrest Gump quote – “Life is like a box of chocolates: you never know what you’re going to get.” Here are some important questions to consider before “life happens”:

If a natural disaster hits my home or business, do I have a plan for financial recovery?

Am I handling my health care expenses correctly to save the most money?

If I am injured or become seriously ill, do I know how I can pay the bills?

So, if your particular box of chocolates sticks you with the coconut-filled one you hate, how can a CPA help? Many CPAs are knowledgeable about insurance, such as long-term disability and property, and can advise you on what you need to be prepared. And if they don’t offer this service directly, they most likely partner with an expert in the area so they can oversee your full financial picture. They also know about the tax incentives related to health care that may help you save and pay for medical expenses.

Next step: Making the Decision

If you’re not sure you’re on the right financial path, or what your path should even be, seriously consider contacting a CPA. To quote entrepreneur and business philosopher Jim Rohn, “You cannot change your destination overnight, but you can change your direction overnight.”

Of course, as a CPA, I’m biased. I’m extremely proud of my profession and believe deeply that people will benefit from our expertise. So let me share a more impartial comment from Manny, one of our readers in response to a much earlier blog, Is Hiring a CPA Worth it?: “Hiring a CPA may be a little costly in the beginning but will pay off in the long run. Tax planning and account management can be really confusing. Having a business and personal adviser will help save your time and money.”

April Walker, CPA, CGMA, Lead Manager Tax Practice & Ethics, Association of International Certified Professional Accountants

An insider's look at avoiding ethical violationstag:typepad.com,2003:post-6a0133f5884316970b022ad37db42e200d2018-07-02T10:09:42-04:002018-07-02T10:11:25-04:00Ethical dilemmas can occur at any time during the career of a tax practitioner. Sometimes, the practitioner doesn’t even know they did anything wrong. As a former IRS Office of Professional Responsibility attorney, cases just like that would come across my desk. A vast majority of these cases came from...AICPA Communications

Ethical dilemmas can occur at any time during the career of a tax practitioner. Sometimes, the practitioner doesn’t even know they did anything wrong. As a former IRS Office of Professional Responsibility attorney, cases just like that would come across my desk.

A vast majority of these cases came from simple misunderstandings of ethical responsibilities — practitioners were not aware they were violating Circular 230 or the practitioner just had a bad day and made a one-time mistake. Review these stories and learn a little more about how easy ethical violations can happen if you aren’t paying close attention. (Note: details have been changed to protect the privacy of those involved).

When an engagement letter becomes an opportunity for tax evasion.

One case that comes to mind involves a practitioner who performed a lot of tax controversy work as a solo practitioner. While he maintained a best practice of using engagement letters, a major issue occurred in each of his engagement letters when representing clients to resolve corporate tax debt. He used a standard engagement letter he found somewhere online that disclosed a tax debt action plan. This action plan stated that he would help close the client’s corporation, re-open a new corporation for the client and request the IRS close the case on the old corporation as “Currently-Not-Collectible – Defunct Corporation.”

This is known as creating alter-egos and can be seen as a tax evasion technique.

This case was originally referred to the OPR from IRS collections. After OPR requested additional engagement letters under Circular 230 section 10.20, it appeared he was using similar language in most of his engagement letters for this type of representation.

The practitioner didn’t understand what he put in his engagement letters. After discussion with the practitioner, we found he didn’t actually utilize that action plan in most situations. While it was a best practice by the practitioner to utilize engagement letters, the better practice is to not only use them, but read them and have an understanding of what they disclose before providing them to a client.

The AICPA Tax Section has a variety of engagement letters to help guide you. And for more on how engagement letters can land you in hot water, check out this blog post about when engagement letters help, and when they can hurt.

When lack of due diligence lands you in hot water.

Each year a CPA prepared the tax returns for a Schedule C construction business that was the only reportable income on the client’s Form 1040. And each year, the business would run $100,000 or so of losses with a minimal amount from non-cash expenditures.

The practitioner would only report the 1099-MISCs the client received as gross receipts. For the year that came under IRS scrutiny, the tax preparer reported only about $50,000 of gross receipts from the 1099-MISCs. Upon audit, the actual gross receipts were closer to $200,000.

Unfortunately, the practitioner did not perform due diligence by questioning the gross receipt totals, despite there not appearing to be a source of funds to support the large losses each year. The business could sustain these losses for several reasons — such as the client receiving a large inheritance or gift — but the practitioner never questioned the client on funding sources for these large cash losses.

When credit card receipts don’t tell the whole story.

A similar situation deals with Form 1099-K, which only captures credit card receipts and not any cash receipts. Practitioners often fail to look at the 1099-K reported amount, and instead consider the industry and make an analysis of whether the gross receipts cash to credit card ratio makes sense.

For example, a fast food restaurant received a 1099-K for $99,000. On the fast food restaurants return, they report gross receipts of $100,000. This means, the restaurant received $1,000 in cash, or alternatively, one percent of sales were in cash. This percent appears low for the industry, so the practitioner should question the client about gross receipts and the low cash to credit ratio, then document his conclusions.

“Practitioners cannot ignore facts that don’t make sense.” This is usually known as willful ignorance. One of the best examples of ignoring facts deals with hobby losses. Practitioners will frequently prepare tax returns for multiple years where a sole proprietorship or other entity will generate a loss year after year. The practitioner often fails to review the past several years of tax returns to see if losses were generated in prior years. While it is fine to prepare a tax return with an entity that has had losses for several years, it’s the practitioner’s responsibility to use due diligence and consider the activity under the hobby loss rules and document their conclusion.

To help with these situations, practitioners should lookout for what the IRS refers to as “LUQs:” Large, Unusual or Questionable items, on tax returns. Anything that appears to be a LUQ on a tax return would require documentation on the position the practitioner uses.

Where to go to learn more

While practitioners can make ethical mistakes without even realizing it, there are common sense measures they can take to reduce the chances of making them. Review these AICPA resources to help stay on top of IRS procedures and rules, communicate with the IRS and resolve IRS account issues.

Practitioners division can help IRS put taxpayers first tag:typepad.com,2003:post-6a0133f5884316970b0224df3726fa200b2018-05-31T12:20:01-04:002018-07-11T09:26:24-04:00“Wouldn’t you know IRS extended filing season an extra day the year I retire.” - Nameless but real CPA On April 17, what was supposed to be the final day for Americans to file 2017 tax returns, Internal Revenue Service (IRS) hardware issues resulted in the outage of several key...Edward Karl, CPA, CGMA

“Wouldn’t you know IRS extended filing season an extra day the year I retire.”

- Nameless but real CPA

On April 17, what was supposed to be the final day for Americans to file 2017 tax returns, Internal Revenue Service (IRS) hardware issues resulted in the outage of several key online systems. The timing couldn’t have been worse. The website crash forced the IRS to delay the tax deadline by one day. It also served as a warning sign for those of us advocating for the agency’s modernization. And don’t tell that CPA that he actually got an extra three in his last busy season. Gravy, as it were.

The day after the technology collapse, the Taxpayer First Act — described as the most transformative revisions to the IRS in 20 years — won unanimous passage in the U.S. House of Representatives. The package of nine bills is intended to redesign the IRS to emphasize customer service, new taxpayer appeal rights, improved responsiveness to victims of identity theft and modernization of technology.

In steering the effort, House Ways and Means Oversight Subcommittee Chairman Rep. Lynn Jenkins (R-Kan.) said “[a]s a CPA, I’ve seen first-hand countless examples of the IRS being out of date with technology and out of touch with the needs of the taxpayer.”

The legislation was rightly focused on taxpayers. But as the Senate considers its own approach to modernizing the IRS, I want to put in a good word for CPA tax practitioners.

You may recall, the AICPA led an effort among several professional organizations and former IRS executives that provided IRS modernization recommendations to Congress last year. In light of the passage of tax reform legislation, the recommendations are particularly critical.

One of the key elements of our proposed framework was the designation of an executive-level “practitioner services” division.

Recommended features of a dedicated “practitioner services” division

· Centralize and modernize IRS’s approach to tax practitioners

· Provide tax practitioners with an online tax professional account with immediate access to all of their clients’ information

· Offer a centralized login system on a secure platform to allow for a single sign-on authentication of the practitioner (as opposed to authentication before accessing each client’s account)

· Provide a digital mechanism for power of attorney and disclosure authorization

· Replace the Centralized Authorization File with a consolidated online solution using electronic signatures and an algorithmic-driven approval process that is as close to real time as possible

· Assign customer service representatives to address issues that practitioners are unable to resolve through the priority hotlines

Over time, the IRS has established a number of functional departments. Unfortunately, these divisions are not coordinated in a way that enables practitioners to access quickly critical information, such as their clients’ account status. Nor do the current teams or processes systematically solicit, gather or evaluate practitioner feedback from a quality review perspective. More importantly, practitioners represent millions of taxpayers every year. A practitioner services division would benefit both the taxpayers served by the practitioner community and allow the IRS to leverage their limited resources in serving unrepresented taxpayers.

Such a division would allow the IRS to rationalize, enhance and place under common management the many current, disparate practitioner-impacting programs, processes and tools. This coordination and improved access of information would avoid practitioners having to submit the same information multiple times to multiple IRS employees, for example.

Finally, to ensure the success of the practitioner services division, it is essential that these services approximate comparable private sector services and allow practitioners to resolve account issues for their clients quickly and efficiently. It’s a win-win for taxpayers.

In a recent interview, former IRS Commissioner John Koskinen remarked that "[o]nce people start to focus on what does it take to run this place appropriately, you're having the right discussion." And as one of the IRS’s most significant stakeholders, we are committed to being part of the discussion — and the solution, as well.

5 tax tips for the newly engaged couple and their CPAtag:typepad.com,2003:post-6a0133f5884316970b0224e03a75cf200d2018-05-17T13:44:09-04:002018-05-17T13:44:34-04:00I’m getting married in June, and for me, wedding planning has been relatively simple and drama-free. I’ve buttoned up the budget, signed every contract, booked travel and have a final headcount for the caterer. There’s just one thing that’s still unsettling my mind. What’s going to happen to my taxes?...Guest Blogger

I’m getting married in June, and for me, wedding planning has been relatively simple and drama-free. I’ve buttoned up the budget, signed every contract, booked travel and have a final headcount for the caterer. There’s just one thing that’s still unsettling my mind.

What’s going to happen to my taxes?

It seems like such a straightforward question, but newlyweds often find themselves on the wrong side of a tax bill. Couples may think it’s silly — or even awkward — to think about taxes just after getting engaged, but a financial head start could do wonders for a marriage (money issues are often cited as a cause of divorce).

As a tax practitioner, you are in the unique position to help guide clients like me through this financial milestone. Knowing what to look for and how to spot potential red flags can be key to keeping them on track. For a little insight, I reached out to Tax Practice & Ethics team members Susan Allen, CPA, CGMA, CITP, and Henry Grzes, CPA.

Here are five questions they say you should ask when determining how to assist your clients through “I do.”

How will the new marriage affect your clients’ withholdings?

Your client likely knows that getting married will influence their filing status, but they may not realize how it could influence their tax burden. Many factors go into determining the rate at which the couple will be taxed, including earnings, investments and other forms of income. A couple’s combined tax liability may end up being less than what it would have been individually, but that’s not always the case. When a couple with similar — and generally high — incomes marry, they may be at risk of a marriage penalty, which can be as high as 12 percent. Tax reform means that this penalty is less common.

It’s possible that a couple will experience a marriage bonus, particularly if they have disparate incomes. The higher income earner will see a reduction in taxes as some of their income will be taxed at a lower tax bracket when filing jointly. Either way, it’s key your clients determine how they will adjust their withholding to eliminate tax season surprises.

Is the new couple creating a blended family?

A married couple must determine if it is in their best interest to file jointly or separately especially if they are creating a blended family. Under the new tax reform legislation, a child tax credit is worth up to $2,000 per qualifying child, with a refundable portion of $1,400. There is also a credit for dependents other than qualifying children under the new law, such as a parent or dependent over the age of 17. It’s important for the couple to remember that this credit begins to phase out at $200,000 for single and $400,000 for joint filers. Run the numbers for your clients to help them determine how they should file.

For couples who have joint or shared custody, this question can be particularly difficult to answer. By statute, a parent must have custody of the child for more than 50 percent of the year to qualify for a tax credit. Also, be sure you’ve verified whether the ex-spouse plans to claim the child as a dependent or not. Help your client have an honest conversation with their ex so both parties are on the same page to avoid potentially expensive miscommunications.

Is your client changing his or her name or address?

Your clients don’t have to report their name change directly to the IRS, but they should notify the Social Security Administration (SSA) before filing their next tax return. If a child’s name changes due to marriage, your client should take a similar step in notifying the SSA. But if the child does not yet have a Social Security number, they will need to apply for an Adoption Taxpayer Identification Number to use with their taxes.

Should your client change addresses due to the marriage, you should advise they fill out an IRS Form 8822. This will ensure they don’t miss any IRS refunds, notices or other communications.

Does your client have any special considerations you should keep in mind?

CPAs should review each client’s situation for special considerations. Couples with investments, property or who stand to claim a significant inheritance should be advised of the unique tax implications of their union. Likewise, issues from previous marriages such as alimony or child support payments must be reviewed. If the parent owes back child support payments and files a joint tax return with their new spouse, the entire refund may be used to pay the debt.

Clients who expect to qualify for a passive loss may get a shock when they are no longer able to qualify. Taxpayers can take up to a $25,000 passive loss (or $12,500 if married filing separately) from rental real estate and other investments, but phase out starts at $100,000 and is completely lost at $150,000 for both individual and married filers

Also note, same-sex marriage is treated the same as traditional marriage for federal tax purposes. Civil-unions and domestic partnerships are not, but state laws may require these couples to file jointly. Be sure to review state guidance.

Are there any red flags your client needs to be aware of now?

A new marriage always has a few wrinkles to iron out, but sometimes a major financial red flag requires special treatment from a CPA.

Getting married could become financially tricky if one spouse owes back taxes. If your clients live in a community property state, both spouses’ incomes could be vulnerable even if the debt was procured before the marriage. Regardless of the state, if the couple plans to file a joint return, the spouse who feels they should not be held legally responsible for the debt may file Form 8379 with the return (or by itself) to request their portion of the refund. If the debt is due to one spouse omitting income or claiming false deductions or credits, Form 8857 may relieve the tax burden for the “innocent” spouse. The couple should keep in mind that both spouses’ financial contributions to the household will be taken into consideration when the IRS is determining available income for payment plan negotiations.

Counsel your clients on considerations outside of tax planning, such as the creation of wills, healthcare proxies, etc., that will protect your client’s assets. Visit 360 Degrees of Financial Literacy for helpful resources to share with your clients regarding these and other financial planning opportunities.

“Will you marry me?” is often the most crucial question a person asks — or answers — in their lives. But these four words also kick off a lifetime of financial conversations, adjustments and sometime-hardships for the couple. Suddenly, two people with likely two different incomes and tax liabilities are planning to combine into one. Or maybe, they’re not planning at all.

Introducing our newest heroes: “The (CP)A-Team” tag:typepad.com,2003:post-6a0133f5884316970b01b8d2e6ea72970c2018-03-31T19:00:00-04:002018-03-31T19:00:00-04:00Pop culture seems to be obsessed with the 1980s. Remakes of popular blockbuster hits are now the norm for movie-goers. From “RoboCop” to “21 Jump Street” to “Footloose,” today’s entertainment is all about nostalgia. So, it’s no surprise that television’s favorite action drama, the “A-Team,” would make a comeback. Updated...Guest Blogger

Pop culture seems to be obsessed with the 1980s.

Remakes of popular blockbuster hits are now the norm for movie-goers. From “RoboCop” to “21 Jump Street” to “Footloose,” today’s entertainment is all about nostalgia.

So, it’s no surprise that television’s favorite action drama, the “A-Team,” would make a comeback. Updated for 2018, the reboot is coming to prime time. And this time, the fearsome foursome is taking on the single greatest threat to our security: cybercriminals.

Airing at 8 p.m. Wednesdays on your television or tablet is America’s newest special task force: “The (CP)A-Team.” Each half-hour episode features the all-CPA unit as they travel the world detecting and responding to cyberattacks and data breaches.

Cyberattacks are on the rise. Personal information is swapped for pennies on the dark web. Ransomware is lurking in the shadows of your desktop. And one team perseveres against it all to expose cyberthieves and other scoundrels.

In 2002, this crack team of auditors met on the job. Fresh out of college and stepping into the vast world of accounting, they found in each other a bond that nothing could shake. Once they graced the cubicles of Metro Zero, New York City’s finest financial institution. Today, they survive as practitioners with a purpose: protecting millions from the loss of sensitive personal and corporate information.

Jane “Caesar” Jones is a master of disguise. She is most commonly seen portraying beauty school dropout “Mrs. Bentley,” a salon owner who uses weak passwords and unsecured wifi devices as part of a ploy to entice small-time hackers. As the leader of the group, it was Caesar’s idea to go rogue after discovering Metro Zero shared client data. Now on the run, she and her team aim to level the playing field and repair the damage done.

Nick “N.N.” (Negative Nelly) Nichols is the muscle for the (CP)A-Team. N.N. is always in a bad mood but is the first on the scene when things get hairy. Armed with only a laptop and personal hot-spot, N.N. attacks hackers before they can reach your server. A reformed hacker, his secret past is known to only Caesar.

S.C. (So Crazy) Miller is the (CP)A-Team’s driver but due to an unfortunate calculator accident, has gone blind. Despite it, he can operate the team SUV with extreme accuracy. S.C. takes this precision into the field with him, overwhelming villains by examining weaknesses in firms’ cybersecurity frameworks and teaching classes on the dangers of phishing emails.

Tiffany “Flygirl” Packer is a master of persuasiveness who can entice hackers. Occasionally referred to as “Lady Boss,” her ability to out-maneuver the bad guys makes her a force to be reckoned with. She’s the only witness to the accident that stole S.C.’s sight. Some suggest she was holding the calculator.

Has your identity been stolen? Has your company been hacked? If you have a problem with cyber controls, if no one else can help, you can hire the (CP)A-Team. Don’t miss this buzz-worthy new show.

Until then, enjoy your April Fool’s Day.

Allison Carter, Communications Manager--Tax, Association of International Certified Professional Accountants

Finding your second wind during busy season tag:typepad.com,2003:post-6a0133f5884316970b01b7c95bf317970b2018-03-28T09:13:36-04:002018-03-28T09:13:36-04:00The last stretch of busy season can be tough. So how do you get that mojo back? Just like your car, your body and brain perform better under certain conditions. Use that analytical brain that makes you a great CPA and run through some key sources of energy to see...AICPA Communications

The last stretch of busy season can be tough.

So how do you get that mojo back? Just like your car, your body and brain perform better under certain conditions. Use that analytical brain that makes you a great CPA and run through some key sources of energy to see where you can replenish.

Time to do a quick 6-point check:

Air – When was the last time you exercised? How often are you moving around during the day? A runner’s ability to get a second wind in a marathon depends on how well they restore oxygen to their muscles. Your brain needs a little more oxygen to function best in the tax season marathon. Exercise stimulates blood flow to your brain, which leads to more oxygen and more energy. If taking a brisk walk or hitting the gym is not feasible, here are some exercises you can do at your desk.

Light – Winter is a tough time to be working a lot, especially if it’s dark when you go to the office and it’s dark when you leave. Just as oxygen has been proven to stimulate brain activity, light can affect your mood, which influences your energy level. Take a moment to go outside and soak up the sun.

Fuel – I can’t say “lay off the caffeine” without being a total hypocrite. Instead, I will suggest keeping an eye on how often you’re filling up that coffee mug, especially since it may mess with your sleep. Stay hydrated by drinking two glasses of water after each cup.

Sleep – An elusive commodity, for sure, but the more you deprive yourself, the harder it will be to function in the final stretch. While light is great during the day, avoid using cell phones, tablets and other electronic devices right before you go to bed to keep that blue light from disrupting your sleep.

Pot of Gold – What’s waiting for you on the horizon? Is it a vacation, lounging around the house, or maybe baseball season? Whatever it is, steal five minutes every day to plan for it. Even if your goal is to do nothing, visualize it and consider tips for making the most of it.

Lastly, take stock of those mental or emotional energy vampires – these often come in the form of incomplete tasks or unresolved issues in relationships. They may be the nagging voice inside your head. Is there something you can do now to deal with it, at least partially?

Association of International Certified Professional Communications Team

3 myths about tax extensions tag:typepad.com,2003:post-6a0133f5884316970b01b8d2e2adf4970c2018-03-15T09:54:37-04:002018-03-15T09:58:00-04:00Sometimes filing a tax extension can be a benefit to your clients, but only if they are clear on what an extension means —and what it doesn’t mean. If you’re a tax CPA, you’ve probably come across a client who chose not to file an extension because they misunderstood how...Guest Blogger

Sometimes filing a tax extension can be a benefit to your clients, but only if they are clear on what an extension means —and what it doesn’t mean.

If you’re a tax CPA, you’ve probably come across a client who chose not to file an extension because they misunderstood how it would affect them. On the other hand, maybe a client was happy to go on extension but for the wrong reasons.

Below are three myths that your clients may have about extensions that you can proactively dispel.

Myth #1:If I go on extension, I can wait until the return is filed to pay.

Your client may not realize that although they have extra time to file, they don’t have extra time to pay. These clients are confident they don’t owe anything, so they do not want to make a tax payment with the extension. They are sometimes in for an unpleasant surprise after a Schedule K-1 arrives that summer, showing income that they did not expect. Now they owe penalties on top of the tax payment. Ouch.

In some cases, this common misconception is mixed in with payment anxiety. Some taxpayers find themselves in a position where it’s difficult to pay a tax bill all at once. They may not always mention this, so it’s important to stress that payment cannot be delayed but installments are an option.

Gerard Schreiber, CPA, recommends that CPAs should send a letter to clients who will need to file for an extension that spells out the client’s responsibility to pay estimated taxes to avoid penalties. He requires his clients to sign the letter before filing the extension to eliminate issues that may arise later such as complaints about late payment penalties.

Myth #2: Going on extension is expensive.

One of the main advantages you can stress to a client who needs to go on extension is that the return will likely be more accurate because it reflects up-to-date information and is not finalized in a rush. This means an amended return (prepared at extra cost) will not be necessary. The client may also save money by allowing time to see if more deductions can be claimed. Additionally, self-employed clients benefit from an extension because they will have more time to fund a SEP IRA, solo 401(k) or SIMPLE IRA retirement plan.

Because they believe an extension may be expensive, clients may resist the idea and plead for more time, offering to get the needed information to you soon. One of the best ways to address this issue is to use an engagement letter for the client to provide tax information. The deadline should also be accompanied by a clear statement that if all information is not received by that date, the client may need to go on extension and will face late payment and interest penalties for amounts not paid by the filing date.

Myth #3: Filing a return after the April deadline makes me more susceptible to an audit.

Lawrence Carlton, a CPA who runs a practice in Massachusetts, has occasionally fielded this question. “It really is a myth,” says Carlton, who also serves on the AICPA’s IRS Advocacy Relations Committee. “Your chances of an audit are not related to the timing” of the filing.

Instead, it is a rating scale that determines the audit. The IRS assigns returns a Discriminant Inventory Function (DIF). The IRS is understandably tight-lipped about the details of DIF, but the bottom line is that the score reflects potential red flags that are on the agency’s radar, such as a high level of charitable contributions compared to reported income.

This year adds a new angle to tax extensions with the passing of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018. There are provisions in each law that affect 2017 returns, which creates confusion as to what certain taxpayers should do as well as uncertainty about how some states will conform to the changes. The IRS is working on implementing this major tax legislation, which should alleviate some of the confusion and allow for more successful tax planning and strategic moves.

Circular 230 Sections 10.22, Diligence as to accuracy, and 10.36, Procedures to ensure compliance, mandate considerations to be followed in the preparation of federal returns, including extensions by practitioners.

Best of luck as you head into the final stretch of busy season.

April Walker, CPA, CGMA, Lead Manager, Tax Practice & Ethics, Association of International Certified Professional Accountants